Assessing The Eastern Company’s (NASDAQ:EML) past track record of performance is a valuable exercise for investors. It enables us to reflect on whether the company has met or exceed expectations, which is a great indicator for future performance. Today I will assess EML’s recent performance announced on 30 September 2017 and evaluate these figures to its longer term trend and industry movements. See our latest analysis for Eastern
Did EML’s recent earnings growth beat the long-term trend and the industry?
For the most up-to-date info, I use the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This blend allows me to examine many different companies on a similar basis, using new information. “For Eastern, its “, latest twelve-month earnings is $7.9M, which, relative to last year’s figure, has climbed up by 14.32%. Since these figures may be relatively short-term, I have estimated an annualized five-year value for Eastern’s earnings, which stands at $6.9M. This means that, on average, Eastern has been able to steadily raise its profits over the past couple of years as well.
How has it been able to do this? Let’s take a look at whether it is solely because of industry tailwinds, or if Eastern has experienced some company-specific growth. Over the last couple of years, Eastern expanded its bottom line faster than revenue by effectively controlling its costs. This resulted in a margin expansion and profitability over time. Looking at growth from a sector-level, the US machinery industry has been growing its average earnings by double-digit 17.33% in the prior twelve months, and a less exciting 4.54% over the previous few years. This suggests that whatever uplift the industry is deriving benefit from, Eastern has not been able to reap as much as its average peer.
What does this mean?
Though Eastern’s past data is helpful, it is only one aspect of my investment thesis. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I recommend you continue to research Eastern to get a more holistic view of the stock by looking at:
1. Financial Health: Is EML’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
2. Valuation: What is EML worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether EML is currently mispriced by the market.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.